Post navigation

FBI’s Graft Probe Magnifies With Searches At City Hall & Mayor’s Home

By Mark Gutglueck
FBI and IRS agents armed with search warrants on Tuesday morning descended upon Adelanto City Hall, the Jet Room medical marijuana dispensary and the home of Mayor Rich Kerr in furtherance of an investigation of issues relating to efforts by Kerr and some other officials to put the 35,000 population, 53-square mile desert city at the forefront of the new social and economic wave born of California’s legalization of marijuana.

Richard Kerr

Also searched was a San Bernardino law office affiliated with the Jet Room.
Tuesday’s action follows by six months the FBI’s arrest of former Adelanto City Councilman Jermaine Wright, who has been charged with bribery in connection with his efforts to capitalize on the city’s tolerance of commercial activities relating to marijuana, including its cultivation, processing, distribution and sales.
Of focus in the probe, according to reliable sources who spoke with the Sentinel, are the actions of, interactions between, or documentation and materials within the possession of individuals and entities involved directly and indirectly in governmental oversight and cannabis-related business operations and proposals in Adelanto. Included among those individuals and entities are Kerr; City Councilman John Woodard; Kerr’s wife, Misty Kerr; a nonprofit charity run by Misty Kerr which has received donations from a number of individuals seeking licensing to establish cannabis-related enterprises in Adelanto; Woodard’s real estate brokerage; former Adelanto City Attorney Julia Sylva; current Adelanto City Attorney Ruben Duran; Jesse Flores, Adelanto’s contract economic development director; Charles Rangel, Adelanto’s community development director; Public Works Supervisor Don Wappler; the Jet Room dispensary, located at 17499 Adelanto Road just south of Joshua Avenue; David Serrano, an attorney originally from Florida, and his wife, Julia Orama Serrano, who in October 2016 together purchased the Jet Room property, which in its heyday was a bar catering to airmen from the long-closed George Air Force Base; Manny Serrano, David Serrano’s brother and a principal in the High Desert Cannabis Coalition; Lisa Marie Guerra, the daughter of David Serrano and Julia Orma Serrano, to whom the Jet Room property was deeded in October 2017 for no consideration; the MJRX Corporation, which has an ownership stake in the Jet Room operation; Jimmy Previti, a principal in Frontier Enterprises and Industrial Integrity Solutions, which has established a large-scale marijuana cultivation facility in Adelanto; American Scientific Consultants, a concern that is pursuing establishing cannabis-related operations in Adelanto; C.B. Nanda, a corporate officer with American Scientific Consultants; Jerry Davis, the president of CSPA Group, a specialized marijuana-based product manufacturing concern; Lifestyle Delivery Systems Inc.; Brad Eckenweiler, the CEO of Lifestyle Delivery Systems; and Shad Boyd, who has publicly acknowledged purchasing property upon which he intends to establish a cannabis-related business after receiving a commitment from Adelanto city officials that the area in which the property he purchased is located would be rezoned to permit cannabis-related enterprises.
Several current or former government officials in Adelanto have been identified as having directly or indirectly provided information which served to initiate, advance or further the investigation, including former city manager Jim Hart, suspended city manager Gabriel Elliott, former city engineer and public works director Tom Thornton, who briefly served as interim city manager, former city attorney Todd Litfin, former Senior Planner Mark de Manincor, former Public Works Superintendent Nan Moore, former Senior Management Analyst Mike Borja, Conservation Specialist/Administrator Belen Cordero and Councilman Ed Camargo.
The Sentinel has learned that Jermaine Wright, who was arrested in November by the FBI and charged by the U.S. Attorney’s Office in federal court with bribery and attempted arson and has remained in federal custody ever since, was recently transferred to a holding cell at the federal correctional institution at Terminal Island. While Wright pleaded not guilty to both charges against him and is currently scheduled for trial in August, the duration of his extended stay in captivity in a circumstance that put him within easy access of the FBI suggests that over the last several months he has been cooperating with federal officials and that the FBI only recently wrung from him the last elements of his account that are of use in furthering the investigation.
Within the last week, according to a formerly high ranking Adelanto official, Kerr had evinced signs of agitation and nervousness. An unconfirmed report to the Sentinel is that Tuesday morning’s action by the IRS and FBI was triggered after agents became concerned that evidence relating to the activity under scrutiny was being disposed of.
Kerr, Wright and Woodard first began militating toward redressing Adelanto’s precarious financial circumstance by clearing the way for marijuana to be produced and marketed in the city shortly after Kerr, Woodard and Charley Glasper were elected in a clean sweep in the November 2014 election in which three incumbents – then-mayor Cari Thomas and then-councilmen Charles Valvo and Steve Baisden – were turned out of office. Beginning in early 2015, Kerr, Wright and Woodard, with the lukewarm support of Glasper, pressured then-city manager Jim Hart and then-city attorney Todd Litfin to work toward undoing the city’s longstanding prohibition against cannabis-related commercial activity. In June 2013, the city council as it was previously composed, at Hart’s suggestion, had declared the city to be in a state of fiscal emergency, a move seen as preparatory toward the city seeking bankruptcy protection. Less than two years later, Kerr, Wright and Woodard were purposed to revive the local economy and generate tax revenue for the city through the marketing of cannabis, as was permitted pursuant to the terms of the passage of 1996’s Proposition 215, the Compassionate Use of Marijuana Act, which legalized marijuana for medical use contingent upon patients first obtaining a doctor’s prescription. Initially, because of Glasper’s opposition to permitting marijuana to be sold to end users within the city, the council confined itself to legalizing the cultivation of marijuana at licensed indoor operations located within the city’s industrial park. That proved too much for Hart, who left as city manager rather than carry out the council majority’s direction. The gap created by Hart’s departure was temporarily filled with public works director Tom Thornton, but after just four months in the interim city manager capacity, he became alarmed at the aggressiveness with which the city was moving to embrace marijuana production and sales as a financial panacea, and he stepped down from the city management post. Similarly, Litfin had misgivings about having Adelanto join with another cash-strapped city, Needles, as the only two of San Bernardino County’s 24 incorporated cities to permit commercial marijuana activity to take place. Just prior to the city finalizing and approving the permitting of large-scale marijuana nurseries in the city in November 2015, Litfin too resigned and the city was obliged to replace him with Julia Sylva. Sylva, literally hours after accepting the city attorney’s assignment, finalized the drafting of the documents and resolutions which the city council, with councilman Ed Camargo dissenting, approved to transform an area within the city’s industrial park into a marijuana cultivation zone.
In December 2015, the city began accepting applications for marijuana-related businesses to set up operations in the city. A frenzy ensued, with so many applicants queuing up at the planning counter that a line wound its way through City Hall and out the door. The sheer number of applicants far outran the available properties zoned for cannabis-related activity. Concern that the integrity of city government was being tested arose when applicants began showing up at City Hall with briefcases full of cash. The implication was that those seeking the limited number of permits available for marijuana production licenses were willing to pay city officials beyond the standard application fees to ensure they obtained one.
Along the way, several city officials began to balk at the new ethos being forced upon them by the city’s political masters. Senior Planner Mark de Manincor, Public Works Superintendent Nan Moore, Senior Management Analyst Mike Borja and Conservation Specialist/Administrator Belen Cordero found themselves suspended or terminated when they refused to approve permits or otherwise facilitate the approval of marijuana-related enterprises.
A spectacle ensued, as would-be cannabis-related business operators began cozying up to the city’s elected leadership, in particular Kerr, Wright and Woodard. With so many applications pending, city officials moved to expand the marijuana cultivation zone. And when 2016’s Proposition 64 calling for legalizing the recreational use of marijuana qualified for the statewide ballot, Kerr, Wright and Woodard used that as cover to expand the city’s tolerance of cannabis-related commercial activity from cultivation to allowing medical marijuana dispensaries to fill prescriptions and potshops, a la liquor stores, to sell the drug to recreational users.
A perception that city officials were being corrupted by all of the investment activity and that they were on the take set in.
There were several particularly egregious displays of what appeared to be collusion between city officials and those looking to turn a profit selling marijuana in the city.
During a closed session vote in December 2015, the city council consented to selling 47 acres of land in the city’s industrial park that was in the possession of the successor to the city’s former redevelopment agency to Newport Beach-based Kojima Development, Inc. at the bargain basement price of $375,000, prorated out at $7,972 per acre. For many, the sale was inexplicable. The amount Kojima paid was $1,023,041 less than the city had paid for the property in acquiring it through its now defunct redevelopment agency.
A month previous to the sale, the city had passed an ordinance clearing the way for marijuana cultivation to take place in its industrial parks. That zoomed the value of the property Kojima had purchased into the stratosphere. Immediately after approval of the sale was made, the city was inundated with offers on the property that dwarfed what Kojima had paid, ranging from $7 million to $12 million to $14 million, the last tendered by Marc O’Hara. Market analysts said the city sold the property for some $9 million to $12 million less than what it was worth.
In October 2016, Woodard, who is licensed as a real estate broker, brokered the sale of the Jet Room, a one-time cocktail lounge that had catered to airmen at the now shuttered George Air Force Base which is situated on a 2.25 acre lot located at 17499 Adelanto Road just south of Joshua Avenue, to David Serrano and Julia Orma. Within two months, the city council ratified a zoning plan that designated the area within which the Jet Room was located as eligible to host medical marijuana dispensaries.
On November 7, 2016, James Previti, Jr., a residential developer active in Adelanto among other places, registered the newly-created Industrial Integrity Solutions as one of the corporate subsidiaries of his company, Frontier Enterprises. On November 16, Industrial Integrity Solutions purchased 31 acres in Adelanto at 12011 Air Expressway. Thirteen days after the purchase, on November 29, 2016, the Adelanto planning commission rezoned the district around that span of Air Expressway so that marijuana cultivation could take place there.
C.B. Nanda, another would-be marijuana/cannabis profiteer, created American Scientific Consultants, LLC. In July 2017, he arranged to purchase from the city, for $1 million, its public works yard, located at 17451 Raccoon Avenue. The public works yard featured two buildings, one of which housed the city’s emergency operations center, which had in large measure been constructed on the site and outfitted through a $375,000 grant from the U.S. Department of Homeland Security in 2011. Shortly after obtaining the city’s agreement to allow it to purchase the public works yard, American Scientific assigned its rights to the property to AMN, LLC, an affiliated company, and entered into an agreement with Canniatric, LLC, a company which makes tinctures of cannabis. At the time the deal for the purchase of the property from the city was tentatively agreed to, it was outside the property zoned for commercial cannabis activity. In August, 2018, the city promoted its community development director, Gabriel Elliott, to the position of city manager. On September 8, 2017, at the direction of the city council, upon which Kerr, Wright, Woodard and Glasper were the controlling majority coalition, one of the first significant actions Elliott took as the city’s top staff member was to orchestrate the city council’s expansion of the city’s cultivation zone to include the property in the 17000 block of Raccoon Avenue. Elliott was not in favor of the zoning expansion. Nor did he feel the pending sale of the city’s public works yard, which was yet tied up in escrow, to be a good idea. Nevertheless, having acceded to the position of city manager less than a month prior to that, he facilitated the zoning change.
After Wright’s November arrest he has remained in custody, no longer able to attend city council meetings, resulting in his being removed as a council member in January. Glasper, who for more than two years had been supportive of the council majority’s moves to facilitate the marijuanafication of Adelanto, was severely chastened by Wright’s arrest and thereafter would no longer support Kerr and Woodard’s agenda. Elliott moved to block the sale of the public works yard to American Scientific. This angered both Kerr and Woodard, who wanted the sale to proceed. In December, Kerr orchestrated a set of three sexual harassment complaints against Elliott, who was immediately put on paid administrative leave while those complaints were investigated. In early March of this year, an independent investigator delivered her finding that the complaints against Elliott could not be sustained. Nevertheless, neither Kerr nor Woodard would support ending Elliott’s suspension. Their unwillingness to reestablish Elliott, who remains under suspension and continues to draw $18,000 per month under that status, is widely perceived to stem from his resistance to the agenda of accommodating cannabis-related business applications and approvals at a pace in keeping with Kerr and Woodard’s expectations.
The FBI has received multiple reports alleging graft in Adelanto, in particular bribery and kickbacks passing from applicants for marijuana-related business licenses in the city to city officials.
Of interest to the FBI, the IRS and the U.S. Attorney’s Office is a charity set up and run by Misty Kerr, Mayor Kerr’s wife. Several of the applicants for marijuana related business licenses in Adelanto have contributed to that charity. Those donations have on multiple occasions come in the form of cash provided to her in envelopes while she is attending city council meetings.
City employees say that City Attorney Ruben Duran has knowledge of the donations made to Misty Kerr’s charity.
Within recent months, Misty Kerr has acquired a new car, a Nissan Infiniti.
Rich Kerr, who was formerly employed by Motorola, left the employ of that company in 2016.
Another area of inquiry for federal investigators pertains to reports that money originating with marijuana-related enterprise applicants has been passed through to Kerr by city employees. One alleged incident in this regard, according to a city employee, involved a public works department mechanic, Bill Rinker, who was provided with $25,000 by one of the applicants for a marijuana-related business.
“Bill Rinker has been with the city for about 20 years,” the employee said. “He was given $25,000, supposedly because he was a hard worker. After he received it, Mayor Kerr told him he needed to give him half. When Bill refused, the mayor asked the cannabis guy to stop the check. I think Bill cashed the check, though, before the payment was cancelled, because he has recently purchased a new truck.”
Also being explored by the FBI, the Sentinel is informed, is the city’s contractual relationship with its consulting economic development director, Jesse Flores. Flores’ contract with the city calls for him to attract businesses to the city. The contract, however, does not preclude him from going to work or accepting fees from those business entities he is seeking to interest in locating into the city. The FBI and IRS are looking to determine if Flores has in fact accepted any fees from the cannabis-related enterprises that have obtained permits in Adelanto. The federal agents also want to know if Flores has shared any of those fees with other city officials.
In addition to City Hall, Kerr’s home, garage and vehicles, and the Jet Room, agents also served a search warrant at 1300 N. Mountain View Avenue in San Bernardino, where the Jet Room has its corporate offices and which also serves as the offices for Professional Lawyers Group, which is associated with David Serrano.
Laura Eimiller, a spokeswoman with the FBI, told the Sentinel, “Many people are surmising about what they believe is going on. The search warrants that were executed were for the gathering of evidence relating to allegations of criminal activity.”
Kerr, who at one point came out of his house and approached agents as they were searching the home’s attached garage, was handcuffed by the agents, who continued the search. A photo by Victorville Daily Press Photographer James Quigg of Kerr, handcuffed and standing on his front lawn surrounded by three FBI agents wearing body armor, one of whom is armed with an assault rifle, was posted to the internet Tuesday morning. The photo led to the widespread impression that Kerr had been arrested. “There were no arrests made,” Eimiller said. The handcuffing was a precaution taken during the search of the Kerr residence, which lasted until approximately 1:30 p.m. Kerr was freed from the handcuffs prior to the agents leaving his premises.
Eimiller said she could not disclose what the basis for undertaking the search was.
“The affidavit for the warrant is under seal, so the details of what established probable cause are secret,” she said.
When the affidavits would be unsealed, Eimiller said, “is not something I can predict. An investigation will continue for as long as it needs to. There is an ongoing investigation.”
Duran did not respond to a voice message left with his office phone.
Michael Stevens, the official spokesman for the City of Adelanto, said in an email sent to the media at 11:11 a.m. Tuesday, “This morning, Federal Bureau of Investigation agents executed search warrants at Adelanto City Hall and the home of Mayor Richard Kerr. As of this morning, the city is unaware of the nature of the FBI’s investigation. Nevertheless, the city remains prepared to cooperate with any investigation being conducted. In light of the foregoing events, City Hall will be temporarily closed for business today. The city anticipates being open for regular business hours tomorrow.”
Stevens added, “The city council wants to assure the public that the city will continue to focus its efforts on providing the services that residents and businesses expect. At the same time, the city will continue to work with law enforcement as their investigation proceeds.”
Stevens did not respond to further questions, saying the prepared response “will serve as the city’s official statement at this time and it is the only information that we have available.”
At Wednesday’s city council meeting, which took place some 36 hours after the raids took place, Kerr was in attendance, immaculately attired in a grey suit, which dramatically contrasted with the shorts, T-shirt and handcuffs he had been photographed in the day before.
In the packed council chambers in which Kerr’s supporters more than outnumbered his detractors, the pastor of the Desert Stream Baptist Church, Thomas Strausbaugh, set the tenor for the evening.
“We know in the wake of news in our city that many would come to hear and gossip and different things, but we do pray we would hear the words of Proverbs 29:11 that says, ‘A fool doth uttereth all his mind, but a wise man keepeth until afterwards.’ I pray tonight that you help guard attitudes and give us a productive meeting,” Strausbaugh said in his convocation.
In an unguarded moment, Kerr in an off-the-cuff remark said that the FBI had seized his cell phone. It is also known that among the other items taken from Kerr’s home was at least one computer.
Kerr said he would not get into specific details with regard to the investigation. “I’m going to try not to really explain it,” he said. “What happened yesterday is an ongoing investigation, so I’m not going to get into a lot of that stuff, but I do have a statement.” He acknowledged “The events yesterday were indeed daunting… a very disturbing and frightening experience for my family and myself.”
He insisted that there was nothing venal or dishonest in his championing transitioning Adelanto to a marijuana-based economy, while suggesting his travail the previous day was a direct outgrowth of that undertaking. “When this council set course to reverse the negative economic conditions created by a series of previous administrations and councils, we were aware of the opposition that could ultimately face our efforts,” he said. “We must not be deterred from the path we have created in reversing the economics of the City of Adelanto. We are moving forward and we will never ever go backwards. We must continue to build a strong and prosperous city for the sake of our citizens, not for the sake of this council. We as the council are here for the citizens and we will continue to be here for the citizens as long as you allow us to be. I am here tonight to continue the effort of bringing prosperity to our city and it is one we are elected to do. We won’t know for certain the outcomes of yesterday’s events. Nevertheless, the council cannot be deterred as we have worked very, very hard in the last three-and-a-half years to get where we are today. We have much work ahead of us and we must continue to lead from the front and we will do that as your council sitting up here on the dais.”
Kerr said he had no malice toward those who spurred the federal investigation or those who have cooperated with it. “For those of you that helped or orchestrated the events that transpired yesterday, I want to thank you,” he said. “You have allowed my family to grow closer as a family, and you have opened the door to a different type of dialogue. Although I didn’t agree with how things happened yesterday due to the fact that my wife and grandchildren at ten and eleven years old were there and had to see that side, I do understand, and they understand, why things happen and it was a great learning experience for them just like they were there when their great grandpa passed away in January of this year. Every day we get educated. They get to see real life, so I really do appreciate, you know, helping me grow my family and making them stronger, because you brought my family that was beginning to go their separate ways and everything, like all families do, yesterday brought my family closer than I’ve ever seen in the last 40 years. With the events of yesterday, you have increased our commitment to making the City of Adelanto the largest, strongest and most economic-friendly city in Southern California, if not in the entire State of California.”
Kerr said, “This is a transparent government. I’m not going to get into what’s going on and everything. You read it in the paper. You’ve seen handcuffs. You’ve seen whatever, but it’s all part of life. This city, the council and staff will, I repeat we will, do anything and everything in our power to help this investigation go forward, come to a conclusion and what it is is what it is. It will be broadcast. It will be sent out, and everyone will know what is going on. So, I will appreciate the patience because a lot of this takes a little bit of time for them to do. It is what it is. They’re going to investigate it and come back with a decision and we’re going to live and abide by that decision because that’s what we’re supposed to do.”
Woodard assured those in attendance that Kerr was giving them the straight scoop. “The city’s in good hands,” he said. “We’re in good shape and the city will continue to move forward in a positive way.”